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Exhibit 10.26
MANAGEMENT AGREEMENT
This Management Agreement (the "Agreement") dated as of November 30, 1992,
between Capital Realty Group Senior Housing, Inc. d/b/a Capital Senior Living,
Inc., a Texas corporation ("Manager"), and Xxxxxxx-Xxxxxx Healthcare
Properties, L.P., a Delaware limited partnership ("Owner").
W I T N E S S E T H:
WHEREAS, owner beneficially owns Cedarbrook, Cane Creek, Xxxxxxxx Creek,
and Sandybrook, that certain 144 bed facilities (collectively the "Facility"),
located at Gallatin and Goodlettsville, Tennessee, Martin, Tennessee, Waxhaw
Township, South Carolina, and Mt. Xxxx, Florida respectively; and
WHEREAS, Manager has certain asset management and property management
duties under the First Amendment To Restated Lease Agreement dated November 30,
1992 regarding the Facility (the "Lease"); and
WHEREAS, Owner is indebted to Third National Bank and First American
National Bank in the approximate amount of $4,000,000.00 which is secured by
the Lease; and
WHEREAS, Owner desires to engage Manager and Manager is willing, to provide
leasing, releasing, leasing related services, and asset management related
services regarding the Facility, pursuant to the terms and conditions set forth
herein.
NOW THEREFORE, for and in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Retention of Manager. Owner hereby retains Manager to provide
leasing, releasing, leasing related services, and asset
management related services in connection with the Facility
under the terms and conditions set forth herein.
2. Responsibilities of Manager. During the Term, as defined
below, Manager shall provide the following leasing, releasing,
leasing related services, and asset management related
services to Owner in connection with the operation of the
Facility.
A. Leasing Services. Manager shall select and direct
the performance of the Facility lessee, and Manager
shall be responsible for the operation of the
Facility and execution on a daily basis of policies
established by Manager and Owner in accordance with
this Agreement.
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B. Releasing Services. Manager shall select, negotiate,
and cause to be documented any releasing or
modification of the lease to the Facility in
accordance with terms and provisions that are
acceptable to owner and recommended by Manager in
accordance with this Agreement.
C. Fiscal Year: Budget. The fiscal year for the
Facility shall be January 1 - December 31st. Within
approximately 60 days following the date of this
agreement, Manager shall review and modify the
Facility's current repair and improvement budget and
submit this revised budget to Owner for approval. In
addition, at least forty-five (45) days prior to the
start of each fiscal year, Manager shall prepare and
submit to Owner for its review and approval, which
approval shall not be unreasonably withheld, an
annual repair and improvement budget for the
following year (the "Budget"). Thereafter, Manager
shall be entitled to make or commit Owner to make
expenditures which are reflected in the Budget, as
well as expenditures which individually do not exceed
10% of the amounts set forth therein for the
applicable capital item (the "Budget Threshold").
Except for emergency repairs referred to in section
2(H), any unbudgeted expenditures and/or expenditures
in excess of the Budget Threshold shall be subject to
Owner's approval, which shall not be unreasonably
withheld.
D. Operational Policies. Manager shall maintain all
operational policies necessary to establish and
maintain the operational standards appropriate for
the nature of the Facility.
E. On-Site Inspection. Manager shall visit and perform
an on-site review of the Facility on at least a
quarterly basis, which on-site review shall include
lessee's general ledger, financial statements, cost
reports, reimbursement information, survey reports,
and any notices of deficiency from Medicare,
Medicaid, any other payor, or any state or federal
regulatory agency.
F. Information. Manager may develop any necessary
informational material, mass media releases and other
related publicity materials in connection with the
Facility.
G. Regulatory Compliance. Manager shall use its best
efforts to obtain and/or maintain all licenses,
permits, qualifications and approvals from any
applicable governmental or regulatory authority
necessary for the lawful operation of the Facility.
H. Capital Equipment and Improvement. Manager shall
advise Owner as to capital equipment and Facility
improvements which are needed to maintain or upgrade
the quality of the Facility and said equipment, or to
replace obsolete or rundown equipment. Owner shall
review and act upon Manager's recommendations as
expeditiously as possible. Manager shall
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not be liable for any cost or liability which owner
may incur in the event Owner disregards Manager's
recommendations. Manager shall make all necessary
and approved repairs, replacements and maintenance
within the budgetary limits set forth in the annual
capital expenditure budget prepared by Manager
pursuant to Section 2(C). Notwithstanding any
contrary provisions in this Agreement, Manager shall
be entitled, without Owner's consent, to make or
commit Owner to make unbudgeted expenditures and/or
expenditures in excess of the Budget Threshold for
the purposes of emergency repairs involving manifest
danger to persons or property or required to avoid
suspension of any necessary service at the Facility.
However, in no instance shall these unbudgeted
expenditures exceed $5,000 without the prior
authorization of the owner.
I. Ancillary Services. Manager shall negotiate for the
provision of necessary ancillary services through
qualified contractors and on an ongoing basis shall
review and analyze the performance of said ancillary
services contractors and, if necessary, shall
negotiate additional or alternative contractual
arrangements therefor. If any contracts for such
services are with related parties to the Manager they
will not exceed the cost of similar services that
could be provided by an unrelated third party.
J. Legal Matters. Manager and Owner shall jointly agree
on appropriate legal counsel for matters pertaining
to the Facility. Owner shall be responsible for all
legal fees, including allocated charges for internal
counsel.
K. Bookkeeping and Accounting. Manager shall provide
bookkeeping and accounting procedures regarding the
Facility and the preparation of proper financial
records. Bookkeeping and accounting procedures and
systems shall be in accordance with the operation
capital and cash programs developed by Manager, which
programs shall conform to generally accepted
accounting principles.
L. Reports. Manager shall prepare and provide to Owner
the following reports, which shall reflect operations
at the Facility:
i. A monthly balance sheet and income statement
prepared in accordance with generally
accepted accounting principles consistently
applied;
ii. Monthly operating trend report;
iii. Monthly facility comparison report
comparing month to date and year to date;
iv. Monthly cash summary and census summary;
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v. Monthly accounts receivable aging and
accounts payable aging schedules;
vi. On a quarterly basis, a cost report analysis
and marketing analysis;
vii. On an annual basis, a repair and improvement
budget analysis and insurance coverage
analysis;
viii. On an annual basis, each Facility's state
survey, cost report and fire inspection
report;
ix. Any additional reasonable operational
information which may from time to time be
specifically requested by Owner.
M. Insurance. Manager shall cause to be obtained and
maintained all such insurance coverage, which shall
include property damage insurance covering the
Facility and the furniture, fixtures and equipment
situated therein, and comprehensive general liability
and professional liability insurance, for the
protection of Owner, Manager, lessee, Facility
employees and volunteers of the Facility. Any
changes in insurance carrier or coverage deemed
necessary by Manager shall be implemented only
following review and approval by Owner.
3. Term. This agreement shall become effective the day and year
first written above and shall continue in full force and
effect until October 31, 2002, hereinafter referred to as the
"Term", unless sooner terminated as provided in paragraph 9
below.
4. Management Fees. For services performed hereunder, owner
shall pay to Manager the following:
A. Management Fee. Commencing with January 1, 1993,
Owner shall pay to Manager six percent (6%) of the
Gross Revenues generated during the immediately
preceding month and shall be payable on the 15th day
of the month following that month in which revenues
were actually collected. "Gross Revenues" shall mean
all collected cash receipts generated by the
Facility. If the services of Manager commence or
terminate other than on the first day of a month, the
compensation set forth in the Section 4(B) shall be
prorated for the number of days for which services
are actually rendered.
B. Expense Reimbursement. Owner shall reimburse Manager
for the following items:
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i. Reasonable food, lodging and travel expenses
for service to the Facility.
ii. Any other items set forth in this Agreement
as reimbursable items.
C. Late Charges. Owner shall pay to Manager, to the
extent permitted by applicable law, interest on any
amount owing to Manager under this Agreement which is
not paid when due, for any period for which any of
the same is overdue (without regard to any grace
period), at a rate equal to the lesser of (i) four
percent in excess of the rate announced from time to
time by Chase Manhattan Bank, N.A. as its prime or
reference rate, as such rate may change from time to
time, and (ii) the maximum rate of interest permitted
by applicable law.
D. Method of Payment. Owner shall pay the amounts set f
xxxx in Sections 4(B) and (C) monthly, in advance, no
later than the fifteenth (15th) day of the month
during which such amounts are earned or paid.
Manager shall be entitled to disburse all such
amounts to itself out of the accounts provided for in
Section 2(D).
5. Proprietary Interest. The systems, methods, procedures and
controls employed by Manager and any written materials or
brochures developed by Manager to document the same shall not,
at any time, be utilized, distributed copies or otherwise
employed or acquired for use outside of this Facility, except
with Manager's prior written consent, which Manager may
withhold in its sole discretion. Neither owner nor owner's
designee shall be entitled to utilize any written material or
brochure outside of this Facility which Manager may have
developed to document said systems, methods, procedures or
controls.
6. No Guaranty of Profitability. Owner acknowledges that Manager
does not guaranty that the Facility will be profitable.
7. Owner Inspection. During the term, Owner shall have the
right, upon request and at reasonable times, to inspect the
Facility and to inspect and/or audit all books and records
pertaining to the operation thereof.
8. Responsibility for Funding. Owner shall make funds available
sufficient to fund the repair and improvement budget referred
to in Section 2(C).
9. Termination.
A. This agreement may be terminated by the Owner:
1. In the event of material breach by Manager of a material
term hereof, which breach is not cured within 60 days after
notice by the Owner (unless
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Manager is using commercially reasonable efforts to cure such failure,
in which case such period shall be extended for one year) and such
failure is the result of Manager's willful misconduct, gross
negligence, or unlawful act as finally determined, by a court having
such jurisdiction regarding such matter.
2. In the event that a petition in bankruptcy is filed by Manager or
its permitted assignee, or in the event Manager or its permitted
assignee makes an assignment for the benefit of creditors or takes
advantage of an insolvency act, by notice to the manager or assignee.
3. In the event that (i) Manager's or any permitted assignee's
corporate existence is dissolved and the duties under this Agreement
are not assumed by Manager or Manager's Affiliate (ii) Manager or any
permitted assignee ceases to do business for any reason, by notice to
the Manager or such assignee, and the duties under this Agreement are
not assumed by Manager or Manager's Affiliate.
B. This agreement may be terminated by Manager in the
event that Manager fails to receive reimbursement of
reimbursable expenses or any compensation due Manager
pursuant to the terms of this Agreement, or any other
compensation due Manager, and such failure continues
for a period of 60 days after Managers written notice
thereof to Owner. Manager may terminate this
Agreement effective immediately upon expiration of
60-day period without further notice to Owner;
provided, however, that this Agreement shall not be
so terminated if the Owners pay Manager all such
expenses and compensation then due and payable on or
before the expiration of said 60-day period.
C. No termination of this Agreement shall affect any
obligation owing by either party hereto to the other
which accrued prior to the effective date of such
termination.
D. Notwithstanding any earlier provisions, and as per
Section N, Number 8 of the Restated Limited
Partnership Agreement of Xxxxxxx-Xxxxxx Healthcare
Properties, L.P., the Parties' agree that should the
Manager become an affiliated party (as defined in
Section B of the Restated Limited Partnership
Agreement of Xxxxxxx-Xxxxxx Healthcare Properties,
L.P.) with the General Partners of Xxxxxxx-Xxxxxx
Healthcare Properties, L.P., either Manager or Owner
may terminate this Agreement on sixty (60) days
written notice; Provided however, that such
cancellation provision shall be deemed waived if
Manager disassociates itself from the General
Partners during any such sixty (60) day notice
period. Alternatively, Manager may successfully avoid
the sixty (60) day cancellation clause by assigning
its management obligations to an unaffiliated entity
reasonably judged to be capable of fulfilling the
Partnership needs for such services.
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10. Miscellaneous.
A. Disclaimer of Employment of Facility Employees. No
person employed by the owner will be an employee of
Manager, and Manager shall have no liability for
payment of their wages, payroll taxes and other
expenses of employment. All such persons will be
employees of the Owner, or, pursuant to Section (K)
hereof, independent contractors or the employees or
independent contractors.
B. Relationship of the Parties: Disclaimer of Liability:
Indemnification. The relationship of Manager to
Owner shall be that of an independent contractor and
all acts performed by Manager pursuant to this
Agreement during the Term shall be deemed to be
performed in its capacity as an independent
contractor. Manager shall not be liable for any
loss, expense or liability incurred by or asserted
against Owner, unless such loss, expense cost or
liability results from the gross negligence or
willful misconduct of Manager. Owner shall indemnify
and hold Manager harmless from and against any and
all loss, expense, cost or liability incurred by or
asserted against Manager arising from or related to
the Facility; provided, however, that Owner shall not
be obligated to indemnify Manager for any loss,
expense, cost or liability which results from
Manager's gross negligence or willful misconduct.
C. Employee Non-solicitation. Recognizing the unique
services provided by employee of Manager, during the
Tern and for a period of two (2) years after
termination of this Agreement, Owner shall not
directly or indirectly solicit or employ any
employees of Manager to become employees of Owner
without Manager's prior written consent, which
Manager nay withhold in its sole discretion.
Likewise, Manager shall not directly or indirectly
solicit or employ any employees of Owner to become
employees of Manager without owner's prior written
consent, which Owner may withhold in its sole
discretion.
D. Assignment: Binding Effect. This Agreement shall not
be assigned by either party without the prior written
consent of the other party, which consent shall not
be unreasonably withheld, Notwithstanding the
foregoing, Manager may assign its rights and
obligations hereunder to an entity controlling,
controlled by or under common control with Manager.
This Agreement shall be binding upon and insure to
the benefit of the permitted successors and assigns
of the parties.
E. Notices. All notices required or permitted hereunder
shall be given in writing and shall be personally
delivered or be sent by registered or certified mail,
postage prepaid, to the following addresses or at
such other places as either party shall designate in
writing:
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If to Manager: Xx. Xxxxx X. Xxxxxxxx
00000 Xxxxxx Xxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
If to owner: Xxxxxxx-Xxxxxx Healthcare
Properties, L.P.
c/o Xxxxxxx-Xxxxxx, Inc., Managing
General Partners
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx, President
Notices shall be deemed effective upon receipt.
F. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the
subject matter hereof and shall supersede all prior
understandings, agreements or arrangements, oral or
written, between the parties.
G. Amendment. This Agreement shall not be modified or
amended except by written instrument signed by both
of the parties.
H. Captions. The captions and headings used herein are
for convenience of reference only and shall not be
construed in any manner to limit or modify any, of
the terms hereof.
I. Attorney's Fees. In the event either party brings an
action to enforce this Agreement, the prevailing
party in such action shall be entitled to recover
from the other all costs incurred in connections
therewith, including reasonable attorney's fees.
Reasonably attorney's fees shall include reasonable
charges allocated for internal counsel.
J. Severability. In the event one or more of the
provisions of this Agreement is deemed to be invalid,
illegal or unenforceable in any respect under
applicable laws, the validity, legality and
enforceability of the remaining provisions hereof
shall not, in any way, be impaired thereby.
K. Representations. Each of the parties represents and
warrants to the other as follows:
i. The execution, delivery and performance of
this Agreement (a) are within the corporate
and partnership powers of the respective
parties,
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(b) have been duly authorized by all
necessary corporate or partnership action,
and (c) do not and will not (1) require any
consent or approval by stockholders or
partners, or (2) violate any provision of any
law, rule, regulation, order, writ, judgment,
decree or award presently in effect having
applicability to the parties or the articles
of incorporation, bylaws, partnership or
joint venture agreements of the parties.
ii. This Agreement constitutes the valid and
binding obligations of Owner and Manager,
respectively, enforceable in accordance with
its terms.
L. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but
all of which together shall constitute but one and
the same instrument.
M. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the
State of Texas.
N. Access to Records, Cost Reports and Financial
Statements. Each of the parties hereby grant the
other, and the appropriate governmental agency access
to all contracts, books, documents and records
necessary to verify the costs of any contract between
any subcontractor and Medicaid/Medicare provider in
accordance with state/federal statutory and/or
regulatory requirements.
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IN WITNESS WHEREOF, the parties have each caused the Agreement to be duly
executed by its duly authorized officer, as of the date first written above.
Owner: Xxxxxxx-Xxxxxx Healthcare Properties, L.P.
c/o Xxxxxxx-Xxxxxx, Inc., Managing General Partner
By: Capital Realty Group Properties, Inc., Its Agent
By: /s/ Xxxxx X. Xxxxxx, President
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Xxxxx X. Xxxxxx, President
Manager: Capital Realty Group Senior Housing, Inc.
d/b/a Capital Senior Living, Inc.
By: /s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
Senior Vice President
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